LONDON-Oil prices advanced on Monday on the back of a weaker dollar and continued expectations of a global supply crunch.
Brent crude futures LCOc1 were down 9 cents at $78.92 per barrel 0334 GMT, after rising 1.3 percent in the previous session.
United States crude stocks increased by 1.2 million barrels according to the American Petroleum Institute (API), sharply reversing the market forecast of -2.7 million barrels, raising prospects for a widening premium in the Brent versus WTI with crude runs worsening in Europe and Asia.
With almost 50 days to go before new U.S. oil sanctions against Iran enter into force, U.S. President Donald Trump has already managed to crush the country's petroleum exports, dealing severe economic damage to Tehran.
The head of Opec has said the oil cartel must stick together for the good of the global economy as Iran faces renewed USA sanctions. The focus on oil supply has been reflected in the options market this week, where investors have scooped up large amounts of bullish buy, or call, options.
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Saudi oil production was 10.29 million bpd in July, as self-reported by Saudi Arabia to both JODI and OPEC.
In addition to these obvious supply issues, trade disputes and financial woes in emerging market countries may affect crude demand.
Bloomberg reported that while Saudi Arabia had no desire to push prices higher than US$80, it may no longer be possible to avoid it.
He did not specify how crude producers would compensate for declining exports from Iran, with new United States sanctions due to hit the Islamic republic´s oil industry on November 4.
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading over 1 percent higher early Tuesday in response to a warning about limited supply from the Organization of Petroleum Exporting Countries (OPEC).
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Brent may fall more than $1 to $76.37 a barrel, while WTI crude prices may revisit their September 14 low of $67.94, he wrote.
Official U.S. government data is due to be released on Wednesday.
Energy ministers of Saudi Arabia, a U.S. ally, and Russian Federation said in May they were prepared to ease output cuts to calm consumer worries about supply.
Intensifying trade tensions between the US and China could hit economic growth and reduce crude oil demand next year, while supply disruption risks could push prices further upward, according to the International Energy Agency (IEA).
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